Once the nucleus for downtown San Francisco's retail market, the city's former Westfield mall is headed for a foreclosure auction next month after its former owners stopped making payments on the 1.4 million-square-foot property.
Unibail-Rodamco-Westfield and Brookfield Properties, the former ownership pair behind the Westfield San Francisco Centre, were recently served a notice of trustee sale indicating that the downtown mall would be sold at a public auction in order to recoup the more than $625.5 million the joint venture owes, according to the notice.
The looming auction is the latest chapter in a troublesome saga for the once-bustling shopping center that has faced an exodus of tenants and mounting financial challenges over the past several years. The foreclosure auction, which sets the stage for an ownership change, comes more than a year after Westfield and Brookfield said they would stop making payments on the mall at 845-865 Market St., blaming the city's deteriorating retail market for the decision to cut ties with the iconic property.
As a result, lenders Deutsche Bank and JPMorgan Chase late last year brought on Trident Pacific Real Estate Group, a Southern California investment firm, to help navigate the property in receivership as the amount the Westfield-Brookfield venture owed on the mall has climbed.
“The notice simply reflects that the lenders are moving forward in the foreclosure process as planned," Gregg Williams, Trident Pacific's principal receiver, said in a statement. "The receiver will continue to diligently manage the property until a new owner is in place and will work hard to ensure a seamless transition when the time comes."
With the auction scheduled for Nov. 14, any outside party can submit a qualified bid, or one that surpasses the minimum amount set by the property's lenders. If nothing comes in, the lenders could put in a placeholder bid that would result in a formal foreclosure on the property, essentially seizing control of the mall from its previous owners, a step most lenders are reticent to take since many would prefer to avoid having to become a landlord — especially one behind a property as large as the former Westfield San Francisco Centre.
Representatives for neither Brookfield nor Westfield immediately responded to CoStar News' requests for comment. The attorney for lenders Deutsche Bank and JPMorgan Chase Bank declined to discuss details about the foreclosure auction notice.
Since the Westfield venture gave up its namesake mall, the property has since been rebranded as the Emporium Centre San Francisco.
Shopping for a solution
While Trident has tried to boost occupancy at the property in the months since its appointment, the mall has largely evolved to become an empty shell of what it was prior to the pandemic.
When the property was put on a watch list in mid 2023, it was about 45% occupied with more than half of its leased space was set to expire before the end of June 2024, according to a report released earlier this year detailing the downtown mall’s defaulted commercial mortgage-backed securities loans. About 55% of the still-leased space was due for a lease renewal within 12 months and an additional 11% of leased space was set to expire between July 2024 and July of next year.
Over the past year, large tenants such as Nordstrom, Madewell, J. Crew, Lucky Brand, Aldo, Adidas, among others have all permanently shuttered their storefronts in the former Westfield Centre.
The shopping center's distress is piece of a challenged outlook for San Francisco's retail market as it has faced a lengthening string of high-profile closures in the aftermath of the pandemic.
Landlords such as Westfield have pointed to the city's depressed foot traffic, perceived increase in crime and a multitude of other factors as reasons for why tenants are no longer interested in planting a stake in the region.
Retail vacancy rates in downtown San Francisco have shot up to nearly 50%, according to CoStar data, and tepid leasing activity hasn't been enough to help fill it. The increased volume of store closures has far outpaced any new leasing activity, with tenants collectively handing back 760,000 square feet more than they were willing to sign on for, according to the data.
Nearly half of that, or roughly 350,000 square feet of retail space, is attributable to tenant closures at Emporium Centre.